14 March 2005 - New "lifestyling" stakeholder pensions regulations on offer to customers
New regulations will offer stakeholder pension customers the chance to have their pension moved into investments that will reduce the risk of experiencing a sudden drop in value just before retirement announced Pensions Minister, Malcolm Wicks.
Stakeholder pension providers will have to offer “lifestyling” to those customers who do not make their own decisions about how and where their pension is invested. It will mean that during the years leading up to retirement their pension will gradually be moved into less volatile investments.
Pensions Minister, Malcolm Wicks, said:
“These regulations will bring the stakeholder pension into the Government’s new suite of stakeholder products. The key change is “lifestyling”. ’Lifestyling’ will help provide people with a degree of certainty in the years leading up to their retirement. This will mean that people can have their pension moved into investments that will reduce the risk of an unexpected drop in value just before they retire. Lifestyling will start at least five years before they plan to retire. However members will be able to opt out of lifestyling if they so choose.
“Stakeholder pensions provide an excellent opportunity for those people with low and medium incomes to save for their retirement. Over 2 million stakeholder pensions have been sold. Contributions to stakeholder pensions in the first half of this financial year have gone up by a quarter, compared to the position a year ago, as more people see them as a way to save for their retirement.”
Malcolm Wicks also confirmed that the stakeholder pension charge cap would be increased. The cap for new members will be an annual management charge of 1.5% for the first ten years, decreasing to 1% thereafter. However, charges for existing members will remain at 1% per annum.
The changes will come into force on 6th April 2005.
Notes for editors
- Stakeholder pensions were introduced in April 2001 and to date over 2.3 million have been sold.
- On 6 April 2005, the Government’s new suite of stakeholder savings products “goes live”. The suite consists of:
- A deposit account
- A medium term savings product
- The stakeholder pension
- The Child Trust Fund is also available within the suite.
- The stakeholder pension can be sold through the new basic advice process that the Financial Services Authority is introducing. This new advice process will help to reduce the costs of selling to people on lower or moderate incomes, whilst at the same time making sure that they are properly protected.
- The title of the amending regulations is The Stakeholder Pension Schemes (Amendment) Regulations 2005 SI 2005 / 577.
- The Department undertook a consultation on the regulations. The formal Response to the Consultation is also published today and is on the Department’s website at http://www.dwp.gov.uk/consultations/2005/index.asp. A Regulatory Impact Assessment is also being published; this is on the Department’s website at http://www.dwp.gov.uk/resourcecentre/ria.asp.
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